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The settlement, struck in September, resolves claims brought by 15 former franchisees who alleged RAMS terminated their franchise agreements without proper cause and withheld 25 per cent of their trail commissions following termination.
The Federal Court’s approval clears the way for the settlement to proceed, with group members set to share the $29.6 million sum, minus over $16 million in deductions for legal costs and a litigation funder’s commission.
Under the settlement, RAMS will also cease withholding the relevant 25 per cent of future trail income and offer group members a buyout of their future trail commission entitlements, estimated to be worth a further $3.3 million.
The buyout offer is to be made within five business days of the settlement-approval orders being made.
RAMS has not admitted liability or wrongdoing as part of the settlement.
Handing down the orders, Justice Michael Lee said: “To the extent any group member is here may I say I congratulate you on reaching what I consider to be a fair settlement.
"It was a risky piece of litigation with no guarantee of ultimate success. And it was conducted well by all involved … So you can now get on with the rest of your lives. Thank you.”
What happened?
The class action stemmed from RAMS’ review of compliance across its franchise network, which led to the termination of franchise agreements and the withholding of part of former franchisees’ trail commissions.
The review followed concerns arising from the Fairfield franchise, which prompted an investigation within Westpac and broader scrutiny of the RAMS network. The process culminated in what was known as Project Guardian, with the Ryde franchise (one of the franchises named in the class action) among those subjected to heightened review.
The former franchisees alleged RAMS breached contractual and statutory duties of good faith by terminating their franchise agreements without proper cause.
They also challenged RAMS’ decision to withhold 25 per cent of their trail commissions after their agreements were terminated, saying the lender’s regulatory review unfairly affected businesses that had complied with its requirements.
The claims were brought against RAMS Financial Group, which operated the franchise network and was then a wholly owned subsidiary of Westpac.
RAMS franchisees marketed home loan products and helped customers apply for loans, while Westpac remained the credit provider and made the ultimate lending decisions.
Settlement is ‘fair and reasonable’
In approving the class action settlement, Lee said the findings in the Fairfield proceeding (a separate but related case that was heard at the same time), demonstrated both the strengths and limitations of the claims against RAMS.
“Westpac had substantial grounds for investigating Fairfield, was entitled to alter its risk appetite and was entitled to subject business introduced through RAMS to greater scrutiny,” he said.
“The intensive review undertaken by the Secured Lending Task Force did not, without more, mean that every anomaly identified during that review represented misconduct by a franchisee or loan writer.”
Justice Lee added that while the applicants had established a breach of the obligation of good faith, “the breach found was a confined one”.
In assessing the settlement, Justice Lee considered the risks of continuing the litigation alongside the benefits secured for group members, including the settlement payment, the return of withheld trail commission and interest, and the cessation of the withholding of future trail income.
“Upon consideration of all these matters, including the litigation risks revealed by the trial and by Sech Finance, the substantial benefits obtained, the proposed allocation methodology, the stage at which the compromise was reached and the informed response of this small class, I am well satisfied that the settlement represents a fair and reasonable compromise.”
Deductions from the settlement ‘undeniably large’
The court also approved deductions of $16.575 million, including a $12 million funding commission. Justice Lee acknowledged the deductions were “undeniably large”, leaving about $13.05 million (or 44 per cent of the settlement sum) for group members.
Nonetheless, Justice Lee concluded that the settlement was “fair and reasonable”, noting that the larger-than-average funder’s commission reflected the risks associated with financially backing the litigation.
Other than the $12 million commission for litigation funder Court House Capital, other costs included $4 million in funded legal costs, about $461,000 in unfunded solicitor costs and approximately $114,000 in settlement approval and distribution costs.
There were no objections to the proposed commission.
RAMS compliance crackdown
The class action was brought against the backdrop of RAMS’ compliance crackdown and subsequent withdrawal from new lending.
Separately to the franchisees’ allegations, RAMS faced civil penalty proceedings brought by the Australian Securities and Investments Commission (ASIC) in June 2025 over its home loan operations.
In October 2025, the Federal Court ordered RAMS to pay a $20 million penalty after the company admitted compliance failures between June 2019 and April 2023.
ASIC alleged those failures included dealings with unlicensed referrers, deficient conflict-of-interest arrangements, and inadequate supervision of representatives. The court also considered instances in which franchise staff submitted false payslips from non-existent employers or altered customer information to support loan approvals.
Westpac announced in August 2024 that it would close RAMS. The bank subsequently entered into an agreement to sell the RAMS residential mortgage portfolio in November 2025.
The sale was completed in August 2026, with the portfolio sold to a consortium comprising Pepper Money, credit funds and accounts managed by KKR, and PIMCO-managed funds.
The portfolio was worth around $15.4 billion at completion, down from $21.4 billion when Westpac signed the binding agreement in November 2025, as loans continued to run off through repayments.
Broker Daily has reached out to a legal representative of the franchisees for comment, while sister brand The Adviser has reached out to Westpac.
[Related: Lender pays $19,800 over ‘no credit check loans’ claim]
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